The in gene of phage Lambda encodes a protein involved in site-specific recombination. The gene is transcribed early after infection from one promoter, pl, and later from a second promoter, pI. Each transcription event requires different positive activation factors, Lambda N and cII proteins, respectively. We have examined pI-promoted transcription in the region beyond the int coding sequence. The int mRNA extends to a site designated tI, which is located 277 nucleotides beyond int. Transcription at tI terminates with 75% efficiency in vitro, and its efficiency is over 95% in vivo. Polymerases initiating at pL transcribe through tI and into the b segment of Lambda DNA. The read-through pL transcript is sensitive to cleavage by the endonuclease, RNaseIII, both in vivo and in vitro. Two specific cuts are made by RNaseIII in a double-stranded RNA structure about 260 nucleotides beyond int in the location of the tI terminator. Functionally, the processed pL transcript is unable to synthesize the int gene product, whereas the terminated and unprocessed pI transcript expresses int. Interestingly, unprocessed pL transcript made in hosts defective in RNaseIII (rnc-) can express int. The place where processing occurs is called sib, and the control of int expression from this site is called retroregulation. Retroregulation by sib is not restricted just to the int gene; we show that if the sib site is cloned beyond a bacterial gene, the gene is controlled by sib and RNaseIII. The RNaseIII processing occurs in a region of extensive dyad symmetry in DNA. The shorter pI transcript forms a stable stem and loop structure at its 3' end in the region of symmetry, but lacks the entire dyad symmetry required for RNA processing that is formed in the longer pI transcript. Processing removes the stem and loop structure from the pL transcript and forms a 3' end that we believe is far more sensitive to exonuclease attack than the end of the pI transcript.